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Takeaway: Confusing FINL guide. Notable chg from NKE in athlete strategy. WMT’s Tesla truck. AMZN closer to streaming. PVH/GIII license. WMT vs Visa.

COMPANY NEWS

 

FINL - 4Q14 Earnings

 

At face value the print looks good. Comps, margins, and EPS all came in ahead of expectations. But the company guided EPS for the year to a high-single-digit to low-double-digit growth rate, with the Street sitting at +14.8%. That's not the end of the world, but the confusing element is that it guided comps +mid-single, which is slightly above the 3.8% rate the Street is modeling. This is a company that has burned people in the past with investment spending, so one would think we'd start to see some decent flow through this time around -- especially given the solid results we're seeing out of Foot Locker.  Separately, the SIGMA move was not a pretty one. Yes, it moved into  Quadrant 3 (worst place to be), but the bigger takeaway is how often it is in a negative inventory and margin position. 

Retail Callouts (3/28): NKE, FINL, WMT, AMZN, PVH, GIII - chart3 3 28

NKE - Nike Showcases Johnny Manziel Pro Day Collection 

(http://www.sportsonesource.com/news/fbu/fbu_article.asp?section=8&Prod=5&id=50475)

  • "Nike, which recently signed Johnny Manziel to an endorsement contract, is wasting no time cashing in. At Texas A&M's pro day on Thursday, Manziel elected to wear Nike full pads and helmet, a move that surprised scouts and the media since most players do not suit up with a helmet during these types of workouts. Nike tweeted out a link to buy all the items from the Manziel 'Pro Day Collection.'”

Retail Callouts (3/28): NKE, FINL, WMT, AMZN, PVH, GIII - chart1 3 28

 

Takeaway: Let's be clear about something, we still think that Manziel is a colossal blow-up risk.  But we give Nike a lot of credit on how they're handling this one. Their old MO was to endorse big athletes, stick them in ads and hope that it trickles down to mainstream product. But Nike has a full array of product associated with Manziel for Pro Day -- far from when he even will even see a snap in the NFL. This marks a fundamental change for how Nike is handling these endorsements. We still don't like the stock here. But like this development.

AMZN - Amazon Considers Streaming Media Service

(http://online.wsj.com/news/articles/SB10001424052702304688104579465690663213198?mod=WSJ_business_whatsNews&mg=reno64-wsj)

  • "Amazon.com Inc. is considering an advertising-supported streaming television and music-video service, a departure from its strategy of linking video to its $99-a-year Prime subscription service, according to people close to the company."
  • "The proposed service, as Amazon has outlined it to potential partners, could launch in the coming months and could feature original and licensed content, these people said. As part of the service's development, Amazon has held talks with the creators of  'Betas,' a series about a Silicon Valley startup that Amazon co-produced last year, these people said."
  • "Amazon also plans to offer free music videos with advertising to people visiting its retail website, two of the people said. A search for Bruce Springsteen CDs, for example, might yield an option to watch the 'Born in the U.S.A.' video."
  • "An Amazon spokeswoman said, 'We're often experimenting with new things, but we have no plans to offer a free streaming media service.'"

Takeaway: The company denied these streaming rumors, but there's no disputing that the company is looking to create its own content. Let's put TV into perspective - over 65% of new shows get cancelled in their first season. NFLX defied the odds and struck gold with two hits. AMZN is 0 for 1 with Beta's and that trend probably continues.

 

WMT - This is what Walmart thinks tractor trailers of the future will look like

(http://www.theverge.com/2014/3/4/5470242/walmart-wave-hybrid-tractor-trailer-concept-revealed)

  • "This could be the truck of the future. At least, that may be the case for Walmart's massive fleet of 6,500 tractors that help supply its stores. It's called the Walmart Advanced Vehicle Experience (WAVE), and it's said to be 20 percent more aerodynamic than the company's current fleet. Walmart CEO Doug McMillion says it has a 'micro-turbine hybrid powertrain that can run on diesel, natural gas, biodiesel and probably other fuels still to be developed.' There's also a battery pack on board with limited electric range."
  • "As you might have guessed from the CEO's statement, the WAVE is merely a concept at this point. 'It may never make it to the road,' McMillion admits, though he adds that 'it will allow us to test new technologies and new approaches.'"

Retail Callouts (3/28): NKE, FINL, WMT, AMZN, PVH, GIII - chart2 3 28

Takeaway: The average 18-wheeler gets about 6 MPG. WMT truckers drive ~700mm miles per year. That’s about $500mm on diesel alone. If that average MPG number went to 18 that equates to about $320mm in cost savings. Pennies for WMT, but significant innovation for the industry if WMT can get the prototype off of the design room floor.

WMT - Wal-Mart Sues Visa Claiming Card Transaction Fee Fixing

(http://www.bloomberg.com/news/2014-03-27/wal-mart-sues-visa-claiming-card-transaction-fee-fixing.html)

  • "Wal-Mart Stores Inc. sued Visa for allegedly conspiring with banks to fix transaction fees, the latest salvo of a multiyear legal fight between retailers and card issuers."
  • "The world’s biggest retailer seeks at least $5 billion in damages for what it claims are violations of federal antitrust laws that could triple that sum."

 

Takeaway: WMT has a serious bone to pick with Visa. The company backed out of the $7.25bil class-action settlement agreed upon in December to pursue this new litigation.

 

OTHER NEWS

Neiman-Marcus - Neiman eyes Hudson Yards for 1st NYC store

(http://nypost.com/2014/03/27/neiman-marcus-makes-groundbreaking-move-into-nyc/)

  • "Neiman Marcus is poised to enter New York...The...department store is nearing a deal to open a flagship store at Hudson Yards, the mega-development under construction on Manhattan’s West Side, The Post has learned."
  • "Neiman is negotiating with developer Related Cos. to anchor the Hudson Yards’ 1 million-square-foot retail complex, slated to open in 2018, with multilevel store that could span upwards of 200,000 square feet, according to sources briefed on the talks."

 

GIII, PVH - G-III Apparel Group Announces License for G.H. Bass Men's Sportswear

(http://ir.g-iii.com/releasedetail.cfm?ReleaseID=836154)

  • "G-III Apparel Group, Ltd. announced today that it has entered into a multi-year license agreement with PVH Corp. under which PVH will design, market, and distribute better men's sportswear for G-III's G.H. Bass & Co. brand, primarily for department store customers throughout North America. The collection will launch for Fall 2014."

WMT - 500.com Limited Enters into Strategic Cooperation Agreement with Yhd.com

(http://www.nasdaq.com/press-release/500com-limited-enters-into-strategic-cooperation-agreement-with-yhdcom-201402)

  • "500.com Limited a leading online sports lottery service provider in China, today announced that it has signed a strategic cooperation agreement with Yhd.com, a leading B2C e-commerce platform for food, beverages and imported food products in China which is owned by Wal-Mart Group, to begin offering the Company's sports lottery products through Yhd.com's extensive e-commerce platform."